When you go through the process of discussing your contractual obligations between a Realtor and yourself, you’re presented with two options – the “Representation Agreement” or a “Customer Service Agreement”. But what’s the difference? Let me break it down like a fraction for you.
Services
As clean as it sounds, the first fundamental difference is a Client receives all the services the Realtor offers, while a Customer is selecting particular services only. For example: A Seller wants to do everything themselves but wants the capability of attracting more buyers by using the MLS Realtor.ca application. They sign a Customer Service Agreement (CSA) to pay for the listing for a term, as per the agreement. They are officially a Customer, not a Client. Another example: A buyer is in the market to buy a home and wants to be shown homes, but complete the deal themselves. They can sign a CSA for the service of showings but may not receive the standard services the Realtor would abide by.
Fiduciary Duty
This is the biggest difference and Clients receive it, Customers don’t. Simply put, at all times the Realtor will look out for the best interest of the Client and provide privacy with regards to your personal and transactional information, motives, anything pertaining to the Client and the transaction. This isn’t always the case for Customers, as I discuss below. To me this is the biggest loss. This is the fundamental use of a Realtor – someone in your corner, working for you, applying all their knowledge of the industry to make the most of your investments and create deals that may otherwise never have been. I mean I suppose it’s not uncommon in service industries. You can represent yourself in court as well if you like, but would you?
Best Interests & Confidentiality
Another check of the box Clients receive, but Customers don’t necessarily. This may seem weird but consider this: During a negotiation to close a sale, a homeowner is selling their house independently and the buyer is represented by their Realtor as a Client. The homeowner may have a customer service agreement with “Brokerage X” to have the house listed on MLS but is negotiating independently. While their Customer Service Agreement is signed with “Brokerage X” for the services of MLS listing, the Customer is not receiving the full spectrum of services to help their negotiation in their best interest, not been serviced with strategic marketing initiatives, comparative market analysis, notified of trends, market updates etc., and could potentially have issues in the transaction. The Buyer however is a Client, and has the full weight of the Brokerage behind them with complete obligation.
But, Why?
Why would anyone choose to be a customer rather than a client, who get all the privileges, leverage, skills, and experience? Good question, most don’t choose the customer path. However, if you are looking for a simple service rather than a full spectrum Representation of Listing Agreement, a Customer Service Agreement (CSA) may be right for you.
But, What If…?
Potential issues come up, right? Let’s check out the most common:
- Customer Buyer, shown a home by the Realtor’s Client listing (an example of fiduciary duty): in this case, we know that the obligation is to the client and the Realtor is to work in their best interest. The Customer asked to be shown homes in a specific criteria and has been shown some they like. The service has been completed. What’s key is that as a Customer, you have no privacy policy – so your reasons for buying, price range etc. is allowed to be shared with the Seller Client, as the Realtor must always work in their best interest.
- What if BOTH are Clients?: Not uncommon, but there are rules for this. This would fall into a Multiple Representation situation, which is discussed with Clients while signing Representation Agreements. The Realtor must act in the best interests of the Client and maintain the fiduciary obligation. No information can be shared about the other client. I describe it this way – “I can’t share information that I would not have known in any other circumstance”. Meaning, in any other circumstance, what would we know about the other party? I wouldn’t know motivation. I’d have no idea what the price range is, no idea what their negotiation position is coming from, nada. Each side plays their negotiation positions to the best of their individual potentials. Also, if one party does not agree to proceed with Multiple Representation (remember, Realtors are obliged to inform of these circumstances), there are options that can be discussed on a case-by-case basis.
If there is any other questions you have about Customer and Client Representation, let me know! I’ll do my best to answer them.
